Japan reviews provision of ODA for Vietnam

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Economic power is second only to "violence" and Official Development Assistance (ODA) is one of the tools demonstrating this great power.

Recently, there has been public concern over news that Japan declares to stop providing its ODA for Vietnam. A group has capitalized on this information to criticize the Government and relevant ministries for issues related to corruption and foreign relations.

But how true is the story? Will Japan stop its ODA provision for Vietnam? What is the crux of the matter?

ODA power

Nowadays, any internet user can easily find full information on the Wikipedia website, which clearly states the advantages and disadvantages of ODA. Specifically, ODA from rich countries is always associated with their benefits and strategies, such as market expansion, wider cooperation and ensuring security and defence goals or pursuit of political objectives.

In terms of economics, ODA recipients must accept the gradual removal of tariff barriers protecting fledgling industries and import-export tax of donor countries. ODA capital sources are also associated with special trade regulations on maximum imports of their products.

 

Although recipient countries have full control over the use of ODA, the list of ODA projects must be approved by donor countries. Despite not directly managing projects, they can indirectly participate in the form of contractors or support experts.

ODA is beneficial to both donor and recipient countries. If recipient countries fail to take full advantage of this capital source, the greater part will belong to the donor countries which can have a huge influence on a dependent nation.

Cutting ODA puts both sides at a disadvantage

The story of Japan’s ODA for Vietnam is no exception. For Japan, its ODA provision for developing countries including Vietnam is regarded as a national strategy.

The facts show that Japan strictly controls the capital source and sets stringent requirements on purpose of use, quality standards, and prices. Most Japanese ODA-funded projects are engaged by Japanese firms under the supervision of their experts.

There is no denying that Japan`s ODA funding has positively contributed to Vietnam’s socio-economic development during the past 20 years, particularly in infrastructure construction. As a result, both Vietnam and Japan enjoy great benefits from Vietnam’s improved infrastructure.

Japanese ODA-funded construction projects are focused in areas where many Japanese businesses are operating or are appreciated for their great potential.

It is therefore not in Japan’s interests to stop provision of ODA for Vietnam. However whether it stops on any level: stopping all, stopping permanently, partially stopping, stopping with hard deadlines, stopping with soft deadlines, is another matter.

In the case that Japan decides to break off relations and stop ODA provision for such reasons as hostility, terrorism or ineffective use of ODA, it is very difficult, time consuming and sometimes impossible to resume provision.

If the Japanese government decides to stop ODA provision, it must also give reasons and official deadlines. The bribery case of Pacific Consultants International (PCI) prosecuted in December 2008 is a typical example of halting ODA at government level. But as soon as the case was clarified, the Japanese side quickly resumed ODA.

In the case of the alleged graft scandal of the Japan Transportation Consultants, Inc. (JTC), the Japanese side only announced “suspension of disbursement" with a "soft" deadline.

According to documents provided by Japan`s Ministry of Foreign Affairs on June 2, at the second meeting of the Vietnam-Japan Joint Committee for fraud prevention for ODA transport projects, Japan requested Vietnam investigate, handle violators and make commitments to preventing recurrence.

Japan will not ratify new ODA capital for Vietnam until Vietnam implements the above requirements and an official report for the next committee meeting, scheduled to take place in late June. This means that if by the end of June, Vietnam is committed to fulfill all the aforementioned requirements, Japan will continue to consider the next ODA.

Stopping ODA provision to Vietnam because of one corrupt project would be very short sighted. Japan’s tight control of ODA is understandable but it benefits greatly from ODA projects. Vietnam is also intensifying its management of ODA projects.

It is now time for relevant agencies to implement strict regulations, to crack down on corrupt behaviors and further enhance the transparency of information on ODA projects, ensuring that ODA capital from countries like Japan are used properly and effectively in line with international donors’ commitments.

 

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